FinTech Consulting helps financial institutions and fintechs who want to leverage the power of instant payments to meet the changing needs of their existing customers and attract new customers
FinTech Consulting of financial institutions, fintechs and other organizations who want to leverage the power of instant payments to meet the changing needs of their existing customers, attract new customers, and to help them navigate key decisions and align with projects and tech initiatives that may already be in flight.
Since The Clearing House introduced instant payments into the U.S. market in 2017 there has been a quarter-over-quarter growth of more than 10% on their Real Time Payment (RTP) rails. Q3 of this year saw more than $34 billion in transactions. According to Marcia Klingensmith, Founder of FinTech Consulting, “72% of the world is already enabled for instant payments, and the recent launch of FedNow is going to spur adoption, we will likely reach ubiquity in the next 5-10 years.” Financial institutions that don’t support instant payments may find their customers migrating to other financial institutions that do.
Real-time payouts are typically associated with real-time expenses. The ability to transfer money in real-time is critical to consumers living paycheck to paycheck, and to businesses struggling to manage cash flow.
Browse more about Fintech Insights: Cross-Border Payments In Australia And New Zealand
Klingensmith points to research that shows 37% of people in the U.S. economy don’t have access to $400 to emergency funds. If the option for instant payments is made available to them through their financial institutions, then those consumers who are living really close to the edge could be paid in realtime, have real-time transparency to their financial situation, and for example, determine if they need to take on an extra gig job to make that rent payment. We see people willing to pay for the ability to access their funds like the instant redemption of funds from Venmo or PayPal to a bank account, fees to use Earned Wage Access service.
On the other hand, by not offering instant payments, financial institutions run the risk of losing customers and their deposit assets. If a customer needs funds and have the opportunity to receive them in real-time and their financial institution doesn’t support it, there is a good chance they will open an account at an institution that does
Additionally, Instant payments have become increasingly vital for small businesses. Around 15% of payment transaction volume on the RTP network is associated with small businesses moving money from their merchant account to their transactional account. Immediate access to funds helps small businesses manage their cash flow which is imperative when running on a tight budget.
According to Klingensmith, financial institutions wanting to take a low risk approach to participating in instant payment networks can start with just receiving payments sent to their customers from other participating financial institutions. FinTech Consulting works with financial institutions to build a strategy and roadmap that aligns to their business needs, customer profile, and risk appetite. The organization makes it easy for clients to understand and navigate key decisions associated with onboarding to the network. Additional services they offer include instant payment training, product, project and sales enablement support to help financial institutions successfully evaluate, plan, and implement instant payments.
“When I first started FinTech Consulting and would ask financial institutions about their strategy for instant payments, almost 75% of them hadn’t heard of instant payments and didn’t think it was relevant to them, in spite of the great education campaigns conducted by the Federal Reserve and The Clearing House.” It’s very important that financial institutions begin implementing instant payments into their systems as soon as possible because there is a demand, their competitors are lining up to implement, there are only so many resources, and if they don’t get in queue they may find themselves losing customers,” says Klingensmith.
“I see instant payments as the way of the future and will help make lives better, as such I’m devoting a part of FinTech Consulting to work with financial institutions, so they can stay relevant to the communities they work so hard to serve.”
Klingensmith believes the future of instant payments will lay the foundation for new payment innovations such as embedded finance, where customers can have their financial needs met where and when they are – whether it be a real-time loan, a purchase of goods, a value-added service. There are many opportunities that open up when the sender and receiver can have confidence that funds have been exchanged, in a secure manner, immediately deposited into their accounts and a confirmation issued. No longer will customers or businesses need to wait two to three days to know if they have good funds before completing a transaction.
Other players in the ecosystem can benefit from instant payments. Klingensmith says, ‘Instant payments offer so much more, extended messaging capabilities and the potential to connect with other instant payment rails across the globe. She further mentions, ‘it can streamline supply chain transactions, simplify insurance payouts, healthcare provider payments, and more. “Every industry has use cases where instant payments can help maken processes more efficient in their business models, and I can help across all those use cases.. but the first thing is getting the financial institutions on the network of instant payments,” says Klingensmith.
Klingensmith has over 15 years of experience in the financial services and payments industry, and over five years working in fraud and identity. She has led international, cross-functional teams to build and deliver secure products and solutions. Klingensmith has also worked with many of the largest banks and financial institutions based out of the United States.
Latest Fintech Insights : Cross-Border Payments In The South-East Asia
[To share your insights with us, please write to pghosh@itechseries.com ]
